Duped investors ponder tax
Swindled David Ross investors are considering legal action over "paying tax for being robbed".
In November last year the Inland Revenue Department told Ross Asset Management investors how to have tax returns from 2008 onwards reassessed. Tax would be recalculated on the fictitious investments. Ram Investors Group head Bruce Tichbon initially estimated the total refund could be worth between $15 million and $20m. But investors were increasingly unhappy with the deal, as more realised the tax refund would be a portion of total tax paid on the money lost.
"It's a very confused situation; we're only beginning to realise how poor the tax refunds are going to be," Tichbon said.
"Going nuclear" on the issue would be a last resort but a consortium of investors had a lawyer standing by, ready to test the refunds in court.
This would take the form of either a "test case" or possibly a class action using Tichbon's 400-plus Ram Investors Group members. "I think we have to push the issue . . . I feel we are going to have to take this to court," he said.
An Auckland-based chartered accountant of more than 30 years' experience lost $875,000 to Ross' fraudulent Ponzi scheme.
She lost her entire investment, which was 20 years of savings she planned to retire on.
She had paid $55,000 tax on her investment but, based on IRD information, would receive a $17,000 refund. She had sent her reassessment application on December 2 last year but had not yet heard back.
Though the formula suggested she would receive only $17,000, she believed investors who had lost everything should get all tax back.
"We've paid, there are no gains.
"Most of these people have lost everything." A client of hers would receive about half the tax they had paid. She was in discussions with Tichbon as to the best method of legal action. "It's whether investors want to stump up some money for Bruce to actually get him to fight a test case.
"I would think from most people I talk to, and even I feel it myself, every dollar counts."
An IRD spokesperson said about 80 amendment requests had been received, and some refunds had been paid.
IRD would continue to work with the liquidator and investors to clarify the tax positions.
According to liquidator PwC some accounts were worth 3.67 per cent of the original value.
Tichbon said investors who faced a total loss were essentially being asked to pay tax for "being robbed". "I put $415,000 in and took absolutely nothing out. I have to pay tax for the services of a thief."
Tax specialist Brent Gilchrist said IRD should be volunteering to refund all tax paid by victims.
"It is simply unfair to require each victim to plead their case for a full refund of tax paid on income that never existed."